---
kind: "section"
citation: "26 U.S.C. § 971"
title: "26"
title_heading: "Internal Revenue Code"
number: "971"
heading: "Definitions"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/971"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter N — Tax Based on Income From Sources Within or Without the United States"
  - "Part III — Income from Sources Without the United States"
  - "Subpart G — Export Trade Corporations"
---

# §971. Definitions

- (a) **Export trade corporations—** For purposes of this subpart, the term “export trade corporation” means—
  - (1) **In general—** A controlled foreign corporation (as defined in [section 957](/usc/26/957.md)) which satisfies the following conditions:
    - (A) 90 percent or more of the gross income of such corporation for the 3–year period immediately preceding the close of the taxable year (or such part of such period subsequent to the effective date of this subpart during which the corporation was in existence) was derived from sources without the [United States](/usc/26/993.md?p=g), and
    - (B) 75 percent or more of the gross income of such corporation for such period constituted gross income in respect of which such corporation derived [export trade income](#b).
  - (2) **Special rule—** If 50 percent or more of the gross income of a controlled foreign corporation in the period specified in [subsection (a)(1)(A)](#a-1-A) is gross income in respect of which such corporation derived [export trade income](#b) in respect of agricultural products grown in the [United States](/usc/26/993.md?p=g), it may qualify as an [export trade corporation](#a) although it does not meet the requirements of [subsection (a)(1)(B)](#a-1-B).
  - (3) **Limitation—** No controlled foreign corporation may qualify as an [export trade corporation](#a) for any taxable year beginning after October 31, 1971, unless it qualified as an [export trade corporation](#a) for any taxable year beginning before such date. If a corporation fails to qualify as an [export trade corporation](#a) for a period of any 3 consecutive taxable years beginning after such date, it may not qualify as an [export trade corporation](#a) for any taxable year beginning after such period.
- (b) **Export trade income—** For the purposes of this subpart, the term “export trade income” means net income from—
  - (1) the sale to an [unrelated person](#f) for use, consumption, or [disposition](/usc/26/424.md?p=c-1) outside the [United States](/usc/26/993.md?p=g) of [export property](#e) (as defined in [subsection (e)](#e)), or from commissions, fees, [compensation](/usc/26/414.md?p=n-5-C-iii), or other income from the performance of commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services in respect to such sales or in respect of the installation or maintenance of such [export property](#e);
  - (2) commissions, fees, [compensation](/usc/26/414.md?p=n-5-C-iii), or other income from commercial, industrial, financial, technical, scientific, managerial, engineering, architectural, skilled, or other services performed in connection with the use by an [unrelated person](#f) outside the [United States](/usc/26/993.md?p=g) of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like [property](/usc/26/317.md?p=a) acquired or developed and owned by the manufacturer, producer, grower, or extractor of [export property](#e) in respect of which the [export trade corporation](#a) earns [export trade income](#b) under [paragraph (1)](#b-1);
  - (3) commissions, fees, rentals, or other [compensation](/usc/26/414.md?p=n-5-C-iii) or income attributable to the use of [export property](#e) by an [unrelated person](#f) or attributable to the use of [export property](#e) in the rendition of technical, scientific, or engineering services to an [unrelated person](#f); and
  - (4) [interest](/usc/26/856.md?p=f-1) from [export trade assets](#c) described in [subsection (c)(4)](#c-4).

  For purposes of [paragraph (3)](#b-3), if a controlled foreign corporation receives income from an [unrelated person](#f) attributable to the use of [export property](#e) in the rendition of services to such [unrelated person](#f) together with income attributable to the rendition of other services to such [unrelated person](#f), including personal services, the amount of such aggregate income which shall be considered to be attributable to the use of the [export property](#e) shall (if such amount cannot be established by reference to transactions between [unrelated persons](#f)) be that part of such aggregate income which the cost of the [export property](#e) consumed in the rendition of such services (including a reasonable allowance for depreciation) bears to the total costs and expenses attributable to such aggregate income.

- (c) **Export trade assets—** For purposes of this subpart, the term “export trade assets” means—
  - (1) working capital reasonably necessary for the production of [export trade income](#b),
  - (2) inventory of [export property](#e) held for use, consumption, or [disposition](/usc/26/424.md?p=c-1) outside the [United States](/usc/26/993.md?p=g),
  - (3) facilities located outside the [United States](/usc/26/993.md?p=g) for the storage, handling, transportation, packaging, or servicing of [export property](#e), and
  - (4) evidences of indebtedness executed by persons, other than [related persons](/usc/26/414.md?p=n-6-A), in connection with payment for [purchases](/usc/26/1361.md?p=e-1-C) of [export property](#e) for use, consumption, or [disposition](/usc/26/424.md?p=c-1) outside the [United States](/usc/26/993.md?p=g), or in connection with the payment for services described in subsections [(b)(2)](#b-2) and (3).
- (d) **Export promotion expenses—** For purposes of this subpart, the term “export promotion expenses” means the following expenses paid or incurred in the receipt or production of [export trade income](#b)—
  - (1) a reasonable allowance for salaries or other [compensation](/usc/26/414.md?p=n-5-C-iii) for personal services actually rendered for such purpose,
  - (2) rentals or other payments for the use of [property](/usc/26/317.md?p=a) actually used for such purpose,
  - (3) a reasonable allowance for the exhaustion, wear and tear, or obsolescence of [property](/usc/26/317.md?p=a) actually used for such purpose, and
  - (4) any other ordinary and necessary expenses of the corporation to the extent reasonably allocable to the receipt or production of [export trade income](#b).

  No expense incurred within the [United States](/usc/26/993.md?p=g) shall be treated as an export promotion expense within the meaning of the preceding sentence, unless at least 90 percent of each category of expenses described in such sentence is incurred outside the [United States](/usc/26/993.md?p=g).

- (e) **Export property—** For purposes of this subpart, the term “export property” means any [property](/usc/26/317.md?p=a) or any [interest](/usc/26/856.md?p=f-1) in [property](/usc/26/317.md?p=a) manufactured, [produced](/usc/26/864.md?p=a), grown, or extracted in the [United States](/usc/26/993.md?p=g).
- (f) **Unrelated person—** For purposes of this subpart, the term “unrelated person” means a person other than a [related person](/usc/26/864.md?p=d-4) as defined in [section 954(d)(3)](/usc/26/954.md?p=d-3).

## Source credit

(Added Pub. L. 87–834, § 12(a), Oct. 16, 1962, 76 Stat. 1029; amended Pub. L. 92–178, title V, § 505(c), Dec. 10, 1971, 85 Stat. 553.)

## Notes

### Editorial Notes

### Amendments

1971—Subsec. (a)(3). Pub. L. 92–178 added par. (3).

### Statutory Notes and Related Subsidiaries

### Treatment of Certain Former Export Trade Corporations

Pub. L. 99–514, title XVIII, § 1876(m), Oct. 22, 1986, 100 Stat. 2901, provided that: “If— a corporation which is not an export trading corporation for its most recent taxable year ending before the date of the enactment of the Tax Reform Act of 1984 [July 18, 1984] but was an export trading corporation for any prior taxable year, and such corporation may not qualify as an export trade corporation for any taxable year beginning after December 31, 1984, by reason of section 971(a)(3) of the Internal Revenue Code of 1954 [now 1986], or (B) such corporation makes an election, before the date 6 months after the date of the enactment of this Act [Oct. 22, 1986], not to be treated as an export trade corporation with respect to taxable years beginning after December 31, 1984,rules similar to the rules of paragraphs (2) and (4) of section 805(b) of the Tax Reform Act of 1984 [set out as a note under section 991 of this title] shall apply to such corporation. For purposes of the preceding sentence, the term ‘export trade corporation’ has the meaning given such term by section 971 of such Code.”